Registering a trademark in China

As we have written a number of times, every company sourcing goods from China should register a trademark in China for any logo or brand name appearing on its goods or packaging. China is a first-to-file country, and companies that do not register their own trademarks are just laying out the welcome mat for trademark squatters. For more on the need to register your trademarks in China, check out the following:

Companies should only register marks that they are certain (or fairly certain) that they will use, and for products that they are certain (or fairly certain) that they will be sourcing. Registering trademarks in China is not cheap. And even though China will grant trademark protection to a brand that has never been used in commerce by the applicant, failure to use a trademark in commerce for three uninterrupted years puts that trademark at risk of cancellation for non-use.

The safest and most comprehensive trademark strategy in China is to register a separate trademark for every logo and brand name that you intend to use in China. If you register a trademark that solely consists of a visual device (e.g., the Nike “Swoosh”), then you can use that device in any size, in any color, and in any layout. Similarly, if you register a trademark that solely consists of a phrase (e.g., “Nike”), then you can use those words in any size, in any font, in any color, and in any layout. If you register both a visual device and a phrase (e.g., separate trademarks for the Nike “Swoosh” and the word “Nike”) then you can use them singly in any combination, size, arrangement, or alignment. As a general rule, registering both is what we recommend to our clients who employ both words and visual devices as part of their branding.

But for some clients, another method may be more cost-effective. If you have a logo that combines a visual device AND words, you can register that logo only and you will gain exactly the same protection as if you had filed separate trademarks for the visual device and each phrase. Take the logo for motion picture studio Paramount Pictures: a graphic of a mountain, with the words “Paramount” above and the phrase “A Viacom Company” below (and, for the rest of 2012, the phrase “100 years” in the middle). If Paramount were to register this logo in China as a trademark – and solely this logo – they would gain protection for the graphic of the mountain, the word “Paramount,” and the phrase “A Viacom Company.”

However, to maintain protection for all of the elements in a logo, you must use the exact logo as registered at least once every three years or else your trademark for that logo will be at risk of cancellation. And if the underlying trademark is cancelled, the protection for the individual logos and words will go away too. Note that exact means exact: same font, same size, same alignment, same everything. To return to the example of the Paramount logo, because the current logo will not be used after 2012, it would be foolish to trademark only the current logo without also trademarking the words “Paramount” and “Viacom.” (I couldn’t resist checking, and all three have in fact been trademarked in China.)

Another risk in solely registering a logo (as opposed to separately registering the words and the visual device) is that the words in the logo will only be protected to the extent that the Chinese trademark examiner who handles your application can read the words and is diligent about accurately recording them on the registration certificate. Given the volume of China trademarks being processed, and the lack of English fluency on the part of the examiners, this is a legitimate concern. And this applies to all trademarks filed in China: a quick check of Paramount Pictures’ trademarks in China revealed that for one trademark, the word on their logo had been registered as “Parmount,” and for another trademark, the phrase “Star Trek” had been registered as “Startrek.” Not sure if these misspellings were due to a filing error on the part of Paramount’s trademark agent or an examiner’s error, but either way, this sort of thing happens way too often with China trademarks. Have you checked your China trademark lately?

In happier news (at least, for fans of Maverick and Ron Burgundy), last month Paramount applied for U.S. trademarks for both “I Feel the Need The Need for Speed” and “I’m Kind of a Big Deal,” as slogans to be emblazoned on t-shirts. En garde, Zazzle!

Registration of trademarks in China has become essential for doing business in China. We have long advocated prompt China trademark registration with our clients. For companies that manufacture and export from China, registration of the English language trademark is essential. For companies that sell products and services in China, registration of the existing English language marks and also the Chinese language marks for the product is essential.

When we first began to push our clients on trademark registration, we were met with a lot of skepticism. However, as we anticipated, the tide has turned. Recent reports from China claim that China now has the largest number of registrations in the world, with over 1.0 million applications submitted per year. It has now become almost impossible to do business in China without a full portfolio of registered English and Chinese language word marks and logos.

Unfortunately, this flood of applications has had the effect of making trademark registration in China a much more difficult process. When we first started doing trademark registrations in the early 2000 period, about all that was required was to simply submit the application. Virtually every application was approved. In fact, at that time, the Chinese authorities were often criticized for approving too many similar marks. In particular, English language marks were almost always approved except when the exact word was used in the same class.

These days, it has become far more common to receive a rejection. This is true for both English language and Chinese marks. It is no longer appropriate to just assume that every application will simply be approved. Careful evaluation of every mark is required. Since rejections have become common, it is now extremely risky to build business under a new mark or brand before receipt of approval from the trademark office. Since the trademark office is very slow in its decisions, often taking years to make a decision, this can pose extreme difficulty for companies attempting to penetrate the Chinese market.

There are several reasons for this change in the trademark environment in China:

The large number of applications means that there are simply fewer choices for available marks, particularly when the mark is a meaningful word.

The trademark office takes a mechanical approach in determining when there is a conflict. Where the same words appear, the trademark office normally ignores meaning and simply finds a conflict. Thus the trademark office does not allow for adding more words to allow for differentiation. If there is any chance of conflict, the trademark office will find it. For example, if someone already has registered the name “Ace” in a particular class, the trademark office will likely reject “Ace Tool and Die Makers and Fabricators” in that same class.

The trademark office also finds conflicts where words are similar but not identical. Since there are no clear rules on how much similarity is not acceptable, this makes the decisions of the trademark office difficult to predict. For example, registering “Alberta” in a class in which “Albert” has already been registered likely will be rejected.

The Chinese language presents additional difficulty. Though there are over 40,000 unique Chinese characters, only about 2,500 characters are in common use. It is therefore difficult to find a succession of characters that is any way unique. Since there is no way to alter spelling/pronunciation to produce a difference, the opportunity to find a unique combination in Chinese that is also intelligible is difficult.

The PRC trademark office has installed sophisticated search software. This search software fuzzy logic function is excellent and allows the trademark office to find more near matches than previously possible. These near matches then get rejected in situations that would never have been noticed in the past.

As a matter of bureaucratic reality, where there is a close call, it is much safer for the trademark office to reject than to approve. When a dispute arises, the Chinese courts have shown much more inclination to support trademark office rejections than to support approvals. Since the trademark office was severely criticized for allowing too many approvals in the past, the office has apparently decided to go as far as possible in the other direction to compensate.

None of the reasons for the difficulties with trademark registration are likely to change for the better in the near future. In fact, trademark registration applications will probably continue to increase, making the situation progressively worse, not better.

So what should be done? Since trademark registration is essential for China, foreign businesses must understand and adapt to the changed trademark environment. This requires at least the following:

Trademark registration should not be treated as a mechanical process. Careful planning is required. In particular, a preliminary search should be undertaken and time must be taken to do the search carefully and to deal with the results in a practical manner.

For word marks, the use of meaningful words should be avoided as much as possible. Coined words should be used whenever possible. Of course, a company that is using its existing U.S. name or mark often does not have a choice on the words that will be used. In such a case, the foreign party must understand that if a meaningful word is used there is a decent chance a conflict will be found and your trademark rejected. This is also true of trademarks of common names. So for example, if your company is called “David’s ties” and someone has already registered David & Goliath in the same class, you will probably be rejected. We are finding that common name registrations are getting more and more difficult.

Even where the best search seems to show that there will not be a problem with registration, all registrants must understand that it has become difficult to predict how the trademark office will rule on any mark. This uncertainty means that it is not as good idea to build brand identity on a mark until after that mark has been formally approved by the trademark office.

There are numerous ways to deal with trademark conflicts. This usually involves negotiation for a license or related agreement with the holder of the mark that has priority. Most foreign companies have a well-deserved aversion to entering into such discussions with parties in China. However, such negotiation will be increasingly important in the new trademark environment.

Finally, some of the conflicting marks simply are not good marks. Some have never been used. Some have been filed with a bad intent. The Chinese trademark system has available a number of procedures for dealing with these bad marks. The procedures take time and money. However, they must be used in order to deal with these situations. Oftentimes, there simply is no other option.

Doing business in China is not for the faint of heart. Dealing with China’s changing trademark environment is one of the many challenges that must be overcome to reach success in an ever changing China.

ABC News is pushing (I received two different emails from ABC on it) a Diane Sawyer/ABC News clip entitled, “‘Made in America’ Products Selling in China.” Though it is the proverbial 3.28 minute puff piece, it is right on the big picture. There are huge opportunities to sell American product and American products are viewed very highly in China.

It starts out noting how “the Chinese spent $104 billion in U.S. exports in the last year — up 542 percent from 10 years ago.” For more on how China has been greatly increasing its purchases of American goods, check out Selling Into China: The New Wave. The clip then highlights a number of large and small U.S. businesses that are either trying to sell into China or have succeeded in doing so. Everyone is happy, everyone is at least a little bit jingoistic, and everything looks as easy as simply putting your product on the net and waiting for the hordes of Chinese consumers to come to you. Of course, real life (as opposed to the media’s portrayal of it) is quite different.

The clip completely fails even to touch upon the following extreme basics:

Logistics

Customs/Duties/Regulations

Organizational structures

Intellectual property

Getting paid

So we will.

Logistics. We are lawyers, not logistics people, but we know enough to know that if you are going to sell product into China, you need to figure out the best way to get it there and the cost of doing so and whether the costs are prohibitive or not.

Customs/Duties/Regulations. Just yesterday, I received an email from someone asking me why it was having to pay 18% at China customs for its food product, while one of its competitors was paying 7%. The e-mailer wrote the letter as though we would have an answer right off the top of our heads, but our response was essentially that we had no clue. We then talked of how it may be because of a difference in processing of the product, it may because of a difference in sizing of the product, it may be because of a difference in from where the product originates or was processed, or it may even be because one of the numbers was wrong. We would need to know a whole lot more even to guess. A few weeks earlier, someone had called me because China customs had just refused entry of their product into China because it did not meet China’s safety standards. The caller kept saying how it had “never even occurred” to him that China might have tougher safety standards than the United States. Well, it should have. The U.S. Government has a very helpful website dealing with China customs. Check it out before you ship.

Organizational Structures. How exactly are you going to sell your product into China? Are you going to do it exclusively from the United States? If so, you will not be able to take RMB unless you use some sort of intermediary. Are you going to use a distributor in China to get your product sold? If so, will this be an exclusive or non-exclusive arrangement? Who will pay for marketing? Who will repair the product when something goes wrong? How will you make sure that the distributor does not do something to tarnish your reputation? Or will you set up an entity in China (a Wholly Foreign Owned Entity (WFOE), a Joint Venture (JV) or a Representative Office) to handle your China sales? Do you have even a basic understanding of how China retail works?

Intellectual Property. If you want to prevent others from using your brand name or your logo in China, you absolutely must register those as a trademark in China and you should do so before you sell any product there. For more on registering trademarks in China, check out WHEN To Register Your China Trademark. You face similar issues regarding copyrights and patents as well.

Getting Paid. Presumably, you are seeking to do business with China so as to increase your profits. Unfortunately, selling product internationally has a much higher risk of non-payment than does selling product domestically. We discussed this in The Basics Of Getting Paid When Selling To China:

If you are going to sell product into China (or anywhere else internationally), you should consider employing the following to increase your chances of not getting stiffed:

Secure all of the payment in advance. Sophisticated buyers typically will not accept this unless you put up a performance bond or open a standby letter of credit so that it can get its advance payment back. Note, however, that it can sometimes be difficult for Chinese companies to obtain government approval to make full payment in advance.

Conduct due diligence on your buyer.

Secure some of the payment in advance. This obviously will not guarantee you full payment, but it is better to lose some as opposed to all from a sale.

Secure a Documentary Letter of Credit. With this, you will be paid when there is documentary evidence you have shipped the product according to the terms and conditions of the letter of credit. Smart buyers typically require an inspection certificate to ensure the product complies with the specifications in the contract or the purchase order. This sort of letter of credit mitigates your risk because your buyer’s bank has irrevocably guaranteed to pay upon presentation of the required documents.

We generally recommend our clients secure this letter of credit from a major (not a tiny) Chinese bank, such as Bank of China, China Construction Bank, Industrial and Commercial Bank of China, China Development Bank, and Bank of Communications, or a branch of a known American, Asian or European bank. WARNING: We have seen more than our share of fake letters of credit.

To encourage exporting, many countries, including the United States, make it fairly easy and cheap to purchase insurance to cover an improper non payment on the letter of credit.

There are all sorts of variations on the above, but these are the basics.

So yes, Ms. Sawyer, selling into China is rife with great opportunities and we would be the last people to say “don’t do it.” But it is not nearly as simple as you portrayed it, at least if you don’t want to lose your shirt.

David Woronov, a Boston-based international lawyer told me a very instructive China trademark story the other day.

Seems a company had come to David with a big China trademark problem. This company had decided to have its products manufactured in China and it thought it could rely on its United States and Madrid protocol filings to protect its trademark/brand in China. It though it could better protect its products by farming their production out to various different manufacturers in China.

Very quickly, this company learned that one of these Chinese manufacturing companies had applied for Chinese trademark registration of the U.S. company’s name and logo in the category of the product it was making for the United States company.

The U.S. company filed “numerous and detailed objections” with the China trademark office to try to stop the registration. Then it sought to negotiate a resolution with the Chinese company with the following result:

It [the United States company] has been able to get full assignments of the trademark applications and any and all attendant rights from and by the Chinese usurper, in exchange for an agreement to order more volume of these products from them (in an unusual twist on all roads lead to Rome, some very reputable folks I work with here and in China went looking for an alternative manufacturer for this particular product, and after peeling away the various trading companies and other middle folks, they always ultimately ended at this same manufacturer). In short, the anticipated delays to the Chinese registrations that might be caused by the objections filed by our client, together with the prospect of losing all current and future business from our client, were enough to cause the Chinese company to capitulate completely. I guess they were not prepared for the costs of capitalizing their own competing business from scratch. Greed may be alive and well, but cash flow is still the king!

In other words, using incentives, the U.S. company was able to keep “its” name in China.

I mention all of this because it has been too long since I wrote a post extolling what I have extolled so many times before. If you want to protect your name or your trademark or your brand or your logo in China, you absolutely must register it in China. And there is absolutely no benefit in your waiting to do so because every day you wait is just another day for someone to sneak in and register it in their own name.

For more on the need to register your trademark in China, I suggest you check out the following:

I am always preaching how foreign companies must register their trademarks in China if they are going to be doing business in or producing product in China (see, for example, “China Trademarks — Do You Feel Lucky? Do You?“). And in most cases, companies should register their trademarks in China now. Right now.

China is a first to file country. This means that — with very few exceptions — whoever files for a particular trademark in a particular category gets it. So if the name of your company is XYZ and you make shoes and you have been manufacturing your shoes in China for the last three years and someone registers the XYZ trademark for shoes, that other company gets the trademark. And then, armed with the trademark, that company has every right to stop your XYZ shoes from leaving China because they violate its trademark.

But saying a company must register its trademark if it is going to do business in China does, at least to a certain extent, beg the question as to when that company should register the trademark. I always tell our clients and potential clients that they should register their trademarks right away. My thinking on this is that if they are going to be doing it anyway, they should do it right away so as to make sure nobody beats them to it.

But what if you are an American company that is thinking of introducing your product into China in a couple of years? What do you do? Well if you are a massive company with a lot of money, you go ahead and register your trademark right now. But if you are a small company, spending the money now may or may not make sense. Where and how do you draw the line? There is no one answer here; it is more a case of knowing it when you see it.

I thought about all this yesterday because I received a call from a small company that was referred to me by a China sourcing company we represent. The China sourcing company had the foresight to tell this other company (let’s call it Company A) that it needed to register its trademark in China before the sourcing company started going out and trying to find manufacturers for Company A’s product. But when I spoke with Company A, it immediately became clear to me that its funds were very limited and that it was unsure if it would be able to find a Chinese manufacturer at a price that would make sense, and if it did find that manufacturer, whether its product would catch on or not. Company A’s not unreasonable plan was to make a limited quantity as a test run and then, if that worked, secure financing to ramp things up.

Company A: Is a trademark really necessary in China?

Me: It is necessary if you are going to be sure to protect yourself from someone taking your name from you. How important is your name to you? If someone takes it, could you stamp a different name on your product for the next go round?

Company A: I really like our name, but I could always come up with a new one if that were to happen. Do you really think someone is going to register our trademark right away in China?

Me: The odds certainly favor you, but you just never know. You can consider waiting until after you see if your product will have legs.

Company A: I would prefer to do that. Am I taking a huge risk?

Me: A lot depends on whether the worst case scenario of having to come up with a new name is terrible for you or not.

You will never get me to say anything other than how important it is to register your trademark in China right away (because I do not want anyone to be able to blame me if “their” trademark is registered by someone else), but obviously the decision on when to register is sometimes a bit more complicated than that.

Over the last six months or so, my firm’s work for Chinese companies going international has zoomed, and with that, my knowledge of how Chinese companies “handle” foreign companies has zoomed as well. One of the things I have learned is that Chinese companies understand the value of trademarks — YOUR trademark. Let me explain.
I am going to have to be very vague here so as to avoid revealing any confidential information, but I can be specific enough so you can get the gist. Two stories:
1. Chinese company manufactures product for US company. Product ships from China with US company name on it and US company distributes it throughout North America. China company also sells its product in North America under its own brand name. US company is trying to get Chinese company to lower its prices and Chinese company is balking. US company is talking of finding another manufacturer. Chinese company tells me that people in China “very friendly” to them registered the US company’s name in China for this product years ago and so if anyone else tries to manufacture this product in US company’s name, Chinese company will be able to stop them based on trademark violation.
China company is very smart. It knew that it could not register the trademark itself because China trademark law prohibits an agent to register the trademark of the company for whom it is acting as agent, so Chinese company did not register the trademark itself. US company is going to be in for a very rude awakening if it ceases to use this Chinese company for its manufacturing. Now here’s the part that ought to really scare you. I asked my Chinese client how they knew to secure the trademark and the response was “everybody in China knows about this.”
2. US Company A is in a very contentious battle with US Company B. US Company A had for many years been working with US Company B, with US Company A assisting US Company B in China. But when things started going bad, US Company A had a Chinese company secure a China trademark for a name that is absolutely essential for US Company B. US Company B does not know this yet as US Company A plans not to tell them unless and until things get really bad, along the lines of a loss at trial, if things ever get that far without resolution.
Because US Company A is a US company, I was a bit concerned that its having orchestrated the registering of a China trademark of a name that is absolutely critical for Company B might somehow subject Company A to legal liability in the US. However, I have discussed this with many US lawyers expert in this sort of thing and all of them are of the view that this is not going to be the case because Company A’s actions were completely legal in China. Amazingly enough, US Company A has a paper trail showing that it strongly advised US Company B of the need for US Company B to register its trademark in China.
Vacuums get filled and if you are having product made in China with your name on it, you had better register your trademark in China, even if (especially if?) your China presence is through a third party.
On the flip side of this, if you are a company that gets paid to handle China outsourcing for Western companies, you would be well advised to put something in writing somewhere (perhaps in your contract with the Western company) making clear that you are of the view that your client should be registering its trademark and that you will not be doing that for them. Such a provision will help protect you from a negligence or breach of contract lawsuit should what I described above happen to your Western client.

Just came across a great post on the benefits of using lawyers before you encounter a problem.

The post is entitled, “Cautionary Tale: Hire Trademark Attorney or Change Name — Three Times,” and it rightly bills itself as “a cautionary tale for business owners who adopt a trademark before talking to a trademark attorney.” The tale is as follows:
Zenith Vineyard in Oregon’s Willamette Valley might win the viticultural prize for having the most names in the shortest period. D.A. Davidson food-industry analyst Tim Ramey settled on Zenith after trademark disputes over his vineyard’s two other names.
Two years ago, London-based Diageo opposed the first name, Belle Provenance Vineyard, saying it was too close to that of Provenance Vineyards in Napa Valley. Ramey then tested the name Belle Orgine Vineyard but ran into trouble with Albertsons over its private-label wine called Origin. Finally, last year he changed the name to Zenith Vineyard.
“We were never willing to hire a trademark attorney for $10,000, so that’s why we got all this wonderful on-the-job education,” Ramey said.

The post then goes on to point out that Mr. Ramey could easily have retained a trademark lawyer for less than $10,000 and then lists what he lost by his unwillingness to pay for legal services:

For one thing, it doesn’t cost $10,000 to talk to a trademark lawyer. But even if it did, think of all the goodwill that Mr. Ramey built up and then lost in his first brand, then built up and lost in his second brand, then had to build up again in his third (and hopefully final) brand. Not to mention all the money he invested in advertising, marketing, signage, and labeling for all three brands. I’m sure to Mr. Ramey, $10,000 now sounds like a bargain.
Learn from this gentleman’s mistakes. Invest in strategic trademark advice up front so you don’t waste precious resources later on.

I am always saying that my firms’ best clients are those who have already been involved in litigation. Having been in litigation, these clients know how truly horrible and expensive it is and they are usually game for doing just about anything to avoid it. I analogize seeing a lawyer to changing the oil in your car: it costs money every time you do it, but it saves money in the long run.
Last month, a US company called me about suing a Chinese company for having “stolen” the US company’s trademark. Further discussion revealed the Chinese company had registered the trademark the American company puts on its products and was now seeking to get the American company to pay a six figure yearly licensing fee for the American company to use it. We get similar calls every few months.
The American company had never registered its trademark in China. Though the company does around $100 million in yearly business, it had never retained a lawyer to assist it in China. I talked about the possibility of our suing the Chinese company for bad faith filing, and told the company that such a lawsuit would be difficult and expensive. I asked them whether they had used a China lawyer to assist with their China IP and their response was that they had “gone into China to save money not spend it.”
I bit my lip but kept my mouth shut.

Our advice to all our clients is to register their trademarks in China before they go there.

China is a first to register country, which means that whoever registers the trademark first gets it.

Yes, there is an exception for famous trademarks, but unless you are Coca-Cola, it is lunacy to bank on a Chinese court holding your trademark is famous when just going ahead and registering it costs so little. Most firms charge less than $5,000 for this. So even if the Chinese Court rules your trademark is famous, you will probably have spent at least $100,000 in making your case. The economics just are not there.

Ferrari, the famous Italian car manufacturer, just proved our point.

In Ferrari is Famous, But Is the Horse Too?, China Business Law Blog wrote on how Ferrari lost its ability to use its famous (but not famous in China) horse logo in China. The post relates how after more then ten years of legal wrangling (anyone think that cost less than $100,000?), the Beijing First Intermediate Court ruled that Ferrari’s horse is not famous enough in China to be considered a famous trademark.

In 1996, White Clouds Sports Merchandise filed for trademark protection of a horse logo to go with a clothing line. Ferrari filed a timely opposition to this registration, claiming that granting White Clouds the trademark would confuse consumers. “The Chinese Trademark Office did not buy Ferrari’s argument, citing that White Clouds registered the graphic of the horse first.”

Undaunted, Ferrari appealed to China’s trademark review board, claiming “both the Ferrari with the horse graphic trademark and the horse graphic alone constituted famous trademarks.” The review board denied Ferrari’s appeal and Ferrari then took its case to court.
Before the court, Ferrari again claimed that the graphic of the horse is closely tied to the Ferrari mark, and it should be considered a famous trademark because the Ferrari trademark has become well known around the world, including in China. The court rejected Ferrari’s claim for the following three reasons:

Ferrari failed to provide sufficient evidence regarding its use of the horse logo in China.

China has a system for recognition of famous trademarks. Recognition of the name “Ferrari” as a famous trademark does not constitute recognition of the Ferrari horse graphic.

The issue in the case is the horse logo, not the Ferrari trade-name. The horse cannot be bootstrapped to the Ferrari trademark for similar protection.

China Business Law Blog concludes its post with some good advice:

After more than ten years of trekking in the Chinese legal system, Ferrari got a disappointing verdict. Hopefully, Ferrari got something else too: a lesson to register its trademarks, [and] related trademarks as early as possible.

The recently instituted China Trade Law Report just published an article I wrote on securing trademarks in China, entitled, “China’s Trademark Laws — Simple and Effective.” The gist of the article is what I have been saying in this blog since its inception: it pays to register your trademarks in China.

The China Trade Law Report is part of the Law.com online media empire, which is part of American Lawyer Media (ALM), which includes such leading legal publications as The American Lawyer, Corporate Counsel, The National Law Journal, all of which have some sort of tie-in Westlaw. I started my practice with a massive law firm (which shall remain unnamed in this post) and I cannot forget when one of the firm’s best known partners was quoted in the American Lawyer as saying something along the lines of, “our associates always know what is going on in the firm.” For years after that, we young associates would joke that we did indeed know what was going on in the firm, but only because we read American Lawyer.

Though new, the China Trade Law Report is shaping up quite nicely. Its goal is to provide topical and practical information to lawyers involved, even peripherally, with China. I am honored to serve on its stellar and diverse Board of Editors, which, in addition to me, consists of the following:

Though the China Trade Law Report will eventually be by subscription only, it is right now free for all. Just click on through as though you are a subscriber and you can see the articles. If you have an article you think might be appropriate for the Report, please let me know and I will make sure it gets into the right hands.

A Chengdu court just awarded 300,00 yuan (~$37,000) to Adobe Systems Incorporated in a software piracy case against a local information technology (IT) company that had installed 55 “pirated” copies of Adobe software. This is the fourth intellectual property rights (IPR) lawsuit Adobe has won in China. It is also the first such victory for an international software company in western China. In “Chinese Counterfeiting — A Different Perspective,”I blogged about how impressed I am with Adobe’s handling of its Chinese business. This case increases my admiration.

A Wenzhou court recently sentenced a counterfeiter of ZIPPO lighters to prison for one and a half years and fined him 100,000 yuan (US$12,400). The counterfeiter possessed 32,980 counterfeit ZIPPO lighters and 6,000 fake lighter shells labeled “ZIPPO” and “MADE IN USA,” worth an estimated $770,000.

The article also discusses how a Shenzhen-based company has applied to register 128 “famous mainland trademarks” in Hong Kong. According to the article, if the companies that own these trademarks do not oppose their registration in Hong Kong, they “will have to pay astronomical ransoms for their trademarks, or be forever banned from the Hong Kong market:”

The trademarks cover more than 20 industries including pharmaceuticals, IT, clothing, food and chemicals. More than 30 of them are well-known Chinese trademarks. The 128 trademarks will be granted legal protection within three months if no opposition is raised. Experts called on the mainland companies involved to legally protect their rights as quickly as possible.

In the United States and most other British law systems, trademark rights arise from use. However, in most countries, including China (and Hong Kong), trademark rights typically go to the first to file for the trademark. The well known trademark is an exception to the first to file rule. The Paris Convention for the Protection of Industrial Property, to which China and 168 other parties are signatories, calls for protecting well known trademarks even in countries where they are not registered. Disputes often arise as to what is meant by “well known’ and to what population well known is referring. Is a trademark well known only in the United States to be considered well known in China as well? China generally says no.

Unless a company is absolutely certain its trademark is so universally recognized that Chinese courts will invariably consider it a well known trademark, the wise course is to register your trademark in China before anyone else can register it there first. Indeed, the high cost of litigation makes this the wise course even for companies confident of their “well known” name.

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About China Law Blog

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.